The core of the holiday shopping season is gradually spreading, moving from Black Friday to Cyber Monday and now even reversing to encroach on Thanksgiving, as more and more stores open their doors just as most Americans are finishing their turkey. This trend highlights how eager retailers are to cash in on the all-important holiday season; as a result, what exactly should investors make of the ensuing sales figures?
According to many industry observers, not much. There are various groups, both industry-related and independent, that post Black Friday sales data within days. These groups, including the National Retail Federation, ShopperTrak, and even MasterCard, each use different calculation methods and their analyses often end up in articles and news reports. Unfortunately, they’re often wrong. One of the most consistent critics of this practice, Barry Ritholtz, puts it more bluntly, claiming that initial sales figures for the Black Friday weekend are so speculative, if not downright biased, that they essentially don’t matter at all. Though we won’t go that far, these initial reports should at least be taken with a grain of salt.
But even if these Black Friday figures could be proven to be accurate, they still might not be particularly important. As retailers extend their best deals beyond black Friday and consumers increasingly hunt for bargains on their computers, the importance of the post-Thanksgiving weekend has begun to diminish. According to statistics from the National Retail Federation, sales on Black Friday weekend have fallen consistently since 2012. Even so, overall sales for the holiday shopping season have been increasing each year over the same period, highlighting a shift away from the crowds and chaos.
At the end of the day, the most telling retail statistics will encompass the entire holiday shopping season and will come from the Commerce Department. Although even these statistics are not without their critics, who charge that the Department does not track newer selling trends such as online shopping with enough precision, they are the most respected and reliable around. These official retail sales figures provide a key insight into discretionary spending, which is used as a barometer of consumer confidence. The very straight-forward reasoning here is that when people are making more money, or feel they can make more money, they will spend more on gifts for themselves and their loved ones. Holiday sales are also highly correlated with overall personal consumption, which is an important component of GDP. Therefore, these numbers, unlike preliminary Black Friday reports, do have a larger macroeconomic significance.
So when you hear the first reports on how great (or how disappointing) this Black Friday was for retailers, don’t read too much into them. Although the larger results do have a role in determining the state of the economy, Black Friday is just the first inning.
